FinTech in India – The Road Ahead

Over the last few years, the way payment is done in India is similar to way it occurs in global markets with a small time lag. India now represents one of the largest market opportunities for payments. With a population of over 125crs being pushed to go digital, India is poised to make the most of digital developments transforming the payments space. Continue reading “FinTech in India – The Road Ahead”


Impact of Trump Presidency in India

On January 20th, 2017 defeating all the opposition, Donald Trump emerged as the 45th president of the U.S.A. Trump’s 15-point agenda which he had elucidated in the run-up to the elections could impact the Indian government, business sector and people in various ways. Continue reading “Impact of Trump Presidency in India”

Monetary Policy Committee

What is a monetary policy committee?

The Monetary Policy Committee (MPC) is a committee of the central bank — Reserve Bank of India, headed by its Governor. It was set up by amending the RBI Act after the government and RBI agreed to task RBI with the responsibility for price stability and inflation targeting. The RBI and the government signed the Monetary Policy Framework Agreement on February 20, 2015.

What is the committee’s mandate?

The MPC is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the target level. The government may, if it considers necessary, convey its views, in writing, to the MPC from time to time. RBI is mandated to furnish necessary information to the MPC to facilitate their decision making.

How is this committee structured?

According to the government, the MPC will have six members. Three each will be nominated by the government and the RBI and each member will have one vote. While the majority voice of the committee will be final in deciding the interest rates and the RBI will have to accept the verdict, the governor gets a casting vote in case of tie.

How is it different from current practice followed by the RBI?

Currently, a technical advisory committee constituted by the RBI, which consists central bank’s top brass including the deputy governor and the governor and external advisors, give their opinion and suggestions on what the RBI should do. But the governor’s word is final on the rates and the advice of the technical advisors is not binding on the RBI

Who are the current members?

RBI Appointed:

  • Urjit Patel, RBI Governor
  • R Gandhi, Deputy Governor, RBI
  • Michael Patra, Executive Director, Monetary Policy, RBI

Government Appointed:

  • Chetan Ghate, Professor at Indian Statistical Institute,
  • Pami Dua, Director at Delhi School of Economics
  • Ravindra Dholakia, Professor at IIM-Ahmedabad

 Further Reading:

Profiles of Govt appointed members

First MPC minutes of meeting

Rail Budget Merger

Understanding the rationale behind rail, general budgets’ merger

Ending a 92-year-old tradition, the Union Cabinet on Wednesday decided to merge the Railway budget with the General budget and agreed in principle to advance the date of its presentation in Parliament.

Why is the Rail budget presented separately in the first place?

Railway historians say that it was during the British rule — in the early 1920s — that on the basis of the report of the Acworth Committee, railway finances (those of government-owned railway companies) were separated from the general finances.

The first Railway budget, under the system, can be traced to 1924.

Why change now?

The move to discard the Rail budget is said to be part of the Modi government’s reform agenda. The NITI Aayog had suggested this merger as the Railway budget was being used to dole out favors by way of new trains and projects.

This merger is also a part of the government advancing the budgetary exercise so as to complete it before March 31 and facilitate the beginning of expenditure on public-funded schemes from April 1.

How is it beneficial?

The merger will help the Railways get rid of the annual dividend it has to pay for gross budgetary support from the government every year. Sources say that the merger will help the cash-strapped Railways save about Rs 10,000 crore annually.

Railway Minister Suresh Prabhu said the merger of rail and general budgets will not impact the functional autonomy of the railways but help in enhancing capital expenditure. It would help the Railways raise extra capital expenditure that would allow them to enhance connectivity in the country and boost economic growth.

How does an early budget help?

An early presentation of budget will ensure that all legislative works are completed before the beginning of the new fiscal, from April, and help in funds allocated to various ministries flowing in from the first quarter.

Sources said the government planned to convene the Budget Session of Parliament before January 25, 2017, present the pre-Budget Economic Survey a day or two before the Finance Minister reads out the budget on February 1.

The advance estimates for the GDP will now be made on January 7, instead of February 7, and mid-year review of expenditure by various ministries is proposed to be completed by November 15.

The idea is to get the budget passed by Parliament, along with the Appropriation Bill and the Finance Bill, before March 24, so as to ensure the implementation of the budget proposals from April 1.

QUORA Answer:

Pros and Cons

Some facts first

After 1924, the Railway Budget was separated from Main Budget and the Railway budget was 84% of Main Budget.

But now Railway Budget is about 4% of Union Budget.

As per Bibek Debroy- The Smart Investor

“There is no need for separate railway budget. We have said it very categorically in the committee report. There are five reasons why railways budget is not necessary,” Debroy said.

Elaborating it, he said, “The origin of this goes back to the Acworth Committee report in 1924. The report was triggered by the question whether East Indian Railway Company should be granted an extension of its lease. Only recommendation of separate railway budget was implemented.”

He further said, “All those countries that Acworth Committee mentioned no longer have separate railway budget. The second reason is that there is no constitutional or legal requirement for separate railway budget. Union Budget is a constitutional requirement. If one is expecting the railways to function according to commercial principles then decisions should be left to railway board. The decision cannot and should not be left to Parliament.”

The economist explained, “The railway budget is an avenue for populism with MPs demanding new trains and stops for existing ones. These decisions should be taken by railway board on a commercial basis. A lot of resources are wasted in the process of preparing it. A very complicated relationship between Finance Ministry and Railways has evolved. We should simplify it,” he added.

Hope it answers, why it needs to be merged?

There seem to be no cons of this as of now, but when it is actually merged we will know. Railways will work fine whether this way or that way. Issues affecting Railways are beyond the budgets.


Impact of US Fed Rate Hike on India

IMPACT on INDIA (Expert opinions)

Indranil Sengupta, India chief economist, Bank of America Merrill Lynch

“We hold the contrarian view that Fed tightening is a long-run positive, although EMs could well see one round of sell off in the coming months. We expect softer oil prices and sufficient forex reserves to keep Fragile Five fears at bay for India in the event of a sell-off, although India’s BoP indicators still trail other BRICs. Fed tapering is also pulling down oil prices below US$100/bbl from US$118/bbl when INR crossed Rs68/USD last year,”

Dipan Mehta, Member, BSE and NSE

FII flows are driven by interest rates movement in the US and other developed economies. Also, asset price movements in those economies also impact global flows.

No doubt, to that extent India is vulnerable and if there is a selloff in global equities or emerging markets, then we will not be spared. “However, the decline may be less than other markets. Nonetheless, there will be a negative effect. India cannot escape a ‘risk off’ trade. Since the new government formation, international events are having a less of an impact as investors focus on government steps to revive the economy and the RBI moves based on macro data such as inflation, GDP growth rates, IIP etc.,” he added.

How would India benefit?

Sutapa Roy, Research Analyst-Economy at Microsec Capital Ltd.

“Now for India, the economic situation is much better than it was 2-3 quarters ago. India has taken some of the major steps compared to its EM peers to control currency movement and increase foreign exchange reserves. Only in recent past the Indian market hit an all-time high. So corrections will definitely be there, but not as much as we saw in 2013 as fundamentals are better now,”

Roy is of the view that India has already outperformed the other markets in the recent past and after corrections, it will definitely attract some fresh capital. Although it will take the US Fed some time to shift from its zero interest rate policy, but if they do that, there may be a kneejerk reaction wherein some hot money may try to get out.

Vikram Kotak, CEO & MD, Asset & Wealth Management, Fortune Financial Services

“On a totality basis, India is possibly the only market in the emerging market basket, where a 15 per cent to 20 per cent earnings growth is reasonable to expect and the economy recovery looks robust with GDP move from 5 per cent to 7.5 per cent in three to five years’ time being almost a surety. There are a lot of positives for India right now than the negatives. However, you might see some healthy corrections coming in when the markets start consolidating again,”

The overall trend of the market looks quite positive and given the fact that the markets have run up in the last three to four months, a correction is indeed healthy as it will give opportunity for fresh investments.

Hemang Jani, Senior Vice President, Sharekhan

 “The US FOMC meet could provide the much-needed correction and about 5 per cent to 10 per cent correction at the index level in any market is part of the bull market story. I am not really perturbed by this. In fact, this would be a great opportunity for a large number of retail investors who have not been able to participate to the extent they would have wished. So it is a great welcome sign for the investors.”

Payment Banks


New players in the banking sector that can use technology in order to achieve financial inclusion in a cost effective manner. These banks are expected to reach customers mainly through their mobile phones rather than traditional bank branches.

It could be uneconomical for traditional banks to open branches in every village, so RBI is giving out differentiated licenses to Payment banks helps these small financial institutions to acquire customers at low costs and increase the financial inclusion.

Whom are they targeted at?

Rural markets, migrant laborers, low-income households and small businesses.

Inspired by the success story of M-Pesa:

Mobile phones could be an easiest way to reach masses as proved hugely in other developing countries like Kenya, where Vodafone’s M-Pesa has been very successful. Two out of three adults use M-Pesa in Kenya to store money, make purchases and transfer funds to friends and relatives.

Services offered by Payment banks:

  • CASA accounts with limit of deposits up to Rs. 1 Lakh
  • Issuance of debit cards usable on ATM networks of all banks.
  • Transfers and remittances through a mobile phone
  • Automatic payments of bills, and purchases in cashless, cheque less transactions through a phone
  • Offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’
  • They can offer forex services at charges lower than banks.

Apart from the services mentioned above, Payment banks can also play a crucial role in implementing the government’s Direct Benefit Transfer Scheme (DBTS), where subsidies on healthcare, education and gas are paid directly to beneficiaries’ accounts.

Basic services not offered by Payment banks:

  • Can’t offer loans
  • Can’t issue credit cards

Which basically mean that these banks can’t earn revenue in the form of net interests which form a majority of a traditional bank’s income. This also means that Payment banks have to operate at really low operational costs for their business model to be viable.



  • Payments banks have been mandated to hold 75% of their liabilities in SLR securities
  • Maximum 25% of it at saving deposits and fixed term liabilities of other commercial banks

Since majority of their balances are held with G-Secs which will yield very low interests, payment banks will transfer these low interests to their customers.

Revenue Model:

Because of the many restrictions imposed by RBI it is clear that the only revenue streams available are fee income from remittances, merchant fees for digital payments. Whether this revenue model is viable is something that has to be seen. Since the poor would be charged fee on every transaction would they find these banks attractive? is a question that needs an answer.

SBI chairperson Arundhati Bhattacharya said, “Neither payments banks nor small finance banks seem to have as yet devised a business model that can be said as viable.”


Although 41 entities applied for a Payment bank license, RBI granted in-principle approvals to 11 entities for setting up payments banks (PBs) in August 2015.

Aditya Birla Nuvo Ltd, Airtel M Commerce Services Ltd, Cholamandalam Distribution Services Ltd, Department of Posts, Fino PayTech Ltd, National Securities Depository Ltd, Reliance Industries Ltd, Dilip Shantilal Shanghvi, Vijay Shekhar Sharma, Tech Mahindra Ltd, Vodafone m-pesa Ltd are the entities which received approvals to their applied licenses.

Out of these Tech Mahindra, Dilip Shangvi (Sun Pharmaceuticals) and Cholamandalam Investment are the ones who pulled out.

Players who could win the race:

Since it’s a low margin and high volume business, Raghuram Rajan feels that the payments bank would work well for those who already have a base of operations and many contact points. Mobile companies are probably in the best position to get the business model right because of their reach. Another entity that is expected to succeed is India Post Payments Bank (IPPB) which is being wooed by commercial banks, insurance firms and asset management firms for equity partnerships and other business alliances. IPPB has a network of at least 150,000 branches; close to 140,000 of them are in rural India. This is its great strength.


RBI’s Measures Towards Masala Bonds


RBI announced that banks can now raise capital through rupee-denominated overseas bonds, or masala bonds. The analogous bonds of China are called “Dim sum” while those of Japan are called “Samurai” bonds. Indian companies are allowed to raise a maximum of $750 million per year through masala bonds with a minimum maturity of 5 years.

Pros of Masala bonds:

  • Issuers carry less risk compared to the investors
  • Since these are rupee denominated, they will be shielded against the risk of foreign currency fluctuations.
  • They create a demand for rupee and would support towards the stability of the rupee

Current state of Masala bonds:

Masala bond issues are in a very nascent stage in India and only have been issued by three big names such as HDFC ltd., NTPC Ltd., and Adani Transmission. The details are as below:


Currently costlier compared to the domestic issues:

The issuers have high domestic ratings but their international ratings are only limited to the country’s sovereign rating i.e. BBB-, a shade above junk. The issuers, though big names, raised money at a cost higher than the companies would have raised in the domestic market due to the fact that the issuers had to bear the withholding tax on top of the initial coupon as the foreign investors refused to bear the tax component. Masala bonds proved to be a costlier source of raising funds for these companies as opposed to the normal. Companies might not choose to raise funds through this method if this route continues to be expensive.

Opinions of industry experts:

According to the head of treasury of a foreign bank, “The reason for going in to this market is purely the novelty factor for now. Otherwise, it makes very little sense for the companies to offer the withholding tax component every time they issue a bond. Demand for these bonds will take a long time to get established.”

Jayesh Mehta, head of treasury at Bank of America-Merrill Lynch said, “It will take time to make Masala bonds acceptable to international investors. Demand for the bonds of lower rated companies will be quite muted. Foreigners ask far more risk premium than Indian investors who are familiar with the Indian names”.

Public sector companies might increase masala bond issuances:

During his November 2015 visit to the UK, PM Narendra Modi had promised to list $1-billion equivalent of masala bonds from government power and utility companies.

Impact of such a move:

PSUs such as NTPC, PFC, REC issue domestic bonds in the range of Rs 20-30,000 crore each every year. If masala bonds eat up a portion of these, the demand for their domestic issues will shoot up even more. Thus the interest rates on the domestic issues might come down making the domestic issues cheaper for the companies. This, perhaps, will offset some of the cost associated with the overseas bonds



GST (Goods and Services Tax) will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses. Under GST, manufacturers will get credits for all taxes paid earlier in the goods/services chain, thus incentivising firms to source inputs from other registered dealers. This could bring in additional revenues to the government as the unorganized sector, which is not part of the value chain, would be drawn into the tax net.

To claim input tax credit, each dealer has an incentive to request documentation from the dealer behind him in the value-added/tax chain. Thus, the new tax regime is seen as less intrusive, more self-policing, and hence more effective way of reducing corruption and improving tax compliance. GST would be levied in 3 different forms.

Forms of GST


The third form would be Integrated GST (IGST) which would be levied by the center, consisting of CGST plus SGST on all inter-state transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services.


  1. Taxation of inter-state services and their method of taxation
  2. Difficulties in defining Place of supply, place of delivery
  3. Integration of certain Central and State taxes (Various Cess, Electricity duty etc.)
  4. Disputes even with regard to classification of goods
  5. Jurisdictional Issues with regard to registration and Assessments

Impact on Economy:

In the first place, the macroeconomic impact of a change to the introduction of the GST is significant in terms of growth effects, price effects, current account effects and the effect on the budget balance.

Secondly, in a highly developed open economy with a high and growing service sector, a change in the tax mix from income to consumption-based taxes is likely to provide a fruitful source of revenue.

Implementation of GST could facilitate a much needed correction in fiscal deficit. In the base case, it is believed that partial GST – one that excludes petroleum goods is most likely. Even with this, fiscal deficit could correct to 3.3% of GDP by fiscal 2017. On the downside, a complete failure to implement GST would result in the fiscal deficit being higher at around 4-4.2% in fiscal 2016-2017. A National Council of Applied Economic Research study suggested that GST could boost India’s GPP growth by 0.9-1.7 per cent.


Strategists warn it could disrupt consumption and growth, at least in the short-term. However, determining the exact economic impact hinges on the GST tax rate. According to a report by HSBC, in terms of growth impact on [GST] implementation, the near-term could be messy, with adjustment costs for the private sector grappling with inter-sector implications, and the central government trying to compensate states for revenue loss. Over the medium-term however, the outlook is positive.

Implementation of the GST in the near-term could bring some upturn in inflation; however, the impact should be transitory, according to a Morgan Stanley report.

HSBC believes the GST will lead to higher foreign direct investment inflows and a narrow current account deficit-factors that should help the INR eventually outperform other Asian and emerging market currencies.





Donald Trump’s improbable victory in the U.S. presidential election provoked global shock and angst on Wednesday over the implications for everything from trade to human rights and climate change. The bombastic billionaire defeated Hillary Clinton in a result that few predicted, as millions of American voters shrugged off concerns over his temperament, lack of experience, and accusations of sexist and racist behaviour.

The India-US “defining partnership” opened a new chapter with the stunning victory of Donald Trump. The element of unpredictability that has just been introduced could go either way, but an initial sweep of Trump’s probable foreign policy gives India an opportunity to up its game with the United States.

In India, Donald Trump’s victory could cause short-term economic panic, but may have long-term foreign policy benefits, argues Neelam Deo, the director of foreign policy think tank Gateway House. Close ties between the US and India under the Obama administration could also take a turn for the worse.

Trump’s view towards India

Trump has indicated that he would work towards a stronger relationship with India, saying he would be “best friends” with India, and broadcasting a message in Hindi saying “ab ki baar Trump sarkar,” referring to Modi’s campaign slogan in 2014 elections. It is unclear if those statements would translate to foreign policy benefits for India as they are designed to woo a small contingent of American Indians.

During the campaign, Trump referred to India in several ways: As a country that was growing fast, as a country that was stealing American jobs, and as a target for terrorists. Early on in his campaign, he declared he was “looking forward to working with Narendra Modi”.

Policy on Government spending and taxation

Trump said that he would leave Social Security as is, trumprepeal and replace Obamacare, and make  government spending more efficient and effective though here he has not been specific.

Trump is proposing lower tax rates for individuals and US companies. The US currently has a federal corporate tax rate of 35%, the highest in the OECD. Trump is calling for it to be lowered to a below-average 15%, with firstyear business investments to be deductible in full.


Policy on Immigration

trump2Immigration is one aspect of Trump’s policy that has been heavily covered by the media. The country’s economic potential would be harmed by the greater economic isolation proposed by Trump, particularly his plan to deport over 11 million illegal immigrants and increase trade barriers with Mexico and China, countries he accuses of taking advantage of their relations with the US.


Fears over Mr Trump’s anti-trade rhetoric were reflected in the falling shares of major Asian exporters – from car makers to cargo firms to shipping companies. He has promised to bring jobs back to America. Trump has promised to punish firms that send their jobs to Asia which could hurt economies like the Philippines and India that have massive outsourcing industries.


Trade Policy

Trump has also promised to ramp up US military presence in the South China Sea (SCS). In the recent past, India has quietly despaired that US’ “rebalance” may remain on paper. Increased US presence in the SCS would be welcomed in both New Delhi and Tokyo.

trump3While Trump has promised to take China to task on unfair trade practices, India would be on the mat as  well because its own trade policies are regressive.

India has benefited from globalisation, but Trump has been elected on a
platform that might make the US more inward-looking. That might cause some amount of crossed wires between India and the US. It’s safe to say that Trump will not move forward with the Trans Pacific Partnership (TPP). For India, which does not qualify for the TPP yet, it might be an opportunity to play a better trade game.



Notes from a lecture by Prof. Manasi Phadke

GDP of a country has to be estimated in the local currency and then converted to dollars if needed, as per the exchange rate which may be decided by agencies. According to CSO (Central Statistical Organisation) GDP of India in the year 2015-16 is roughly 126 Lakh Crore rupees. GDP of India by World Bank estimates is $2.07 trillion and according to IMF is $2.2 trillion. The number of times money changes hands in one year can create a bigger income on the same money base. This is called velocity of money. Hence, GDP is always multiple times the amount of money in circulation. The velocity of money in India is estimated to be between 4 and 5. This figure enables us to find the money supply in the country by comparing it to GDP figures, approximately 30 lakh crore rupees.

downloadWhile money can be defined as something which is printed by the RBI while income has an underlying economic activity to it, such as production of a good or service. On the other hand, the only money which is also income is black money. It is income which is not reported.

Literature on corruption in India

In 2011, Ram Jethmalani submitted writ petition to the Supreme Court saying that there should be an independent agency looking into corruption charges in India. Accordingly, Special Investigative Team (SIT) was formed to figure out sources of black money and how to stop it. In 2013, Anna Hazare was the most influential to pass the Jan Lokpal Bill. Lokpal is a central agency and Lokayuktas are the state level arms of the Lokpal. Certain high level ranking offices are out of the purview of RTI, and hence Lokpal and Lokayuktas looks into corruption at the highest offices of the Govt not covered by RTI.

In 2012, the white paper on black money was published by Ministry of Finance. It firstly defines black money, similar definition also given by NIPFP (National institute of Public Finance and Policy), New Delhi, currently headed by Dr. Rathin Roy. Defined as “assets or income or resources that have been neither reported to public authorities at the time of generation nor have they been reported at any time during their possession.”

There are two sources of black money

  1. Criminal or illegal activity- since the activity itself is illegal, income from this source cannot be reported. Eg. Drug trafficking, smuggling, kidnapping, illegal mining, illegal forest felling.
  2. White collared corruption- These are legal activities which have been manipulated. Eg. Understating invoices, giving projects without due tendering process.

Responses of the government to both these sources also vary. On criminal activity, the government takes a hard stance against it. On the second source, the stance of the government is relatively soft due to loopholes in laws. Hence, its strategy to control it also firstly involves, revision of legal provisos.

Basic elements in which corruption usually found:

  1. Corporate Malpractices– eg. under and over charging of invoices
  2. Gold– Buying and selling of gold in cash and without receipt very easy. It has a two pronged effect as black money hence gets converted to gold and the goldsmith too, gets cash to illegally import gold.
  3. Land and Real Estate– This aspect forms a major portion of white collared corruption.
  4. International Trade and Transfer Pricing– Listed to be the biggest contributor to corruption. This mostly occurs through Transfer Pricing (TP), which can be explained through the following example.

Suppose there is a German Company, ABC which has its subsidiary in India, XYZ. XYZ imports materials from its parent company ABC, produces the good at low cost and exports it back to Germany. As India has a higher corporate income tax rate compared to Germany, it may be beneficial to overprice the materials when importing and then sell the fully assembled product at lower cost, thus under reporting profits and underpaying taxes. The excess money has flown out of the country, a phenomenon called capital flight. It is estimated that 15-20% of India’s GDP is lost through capital flight, as difficult to set norms for TP. Money lost through capital flight is then brought back illegally, through round tripping. This occurs in the form of illegal gold imports, FDI, hawala, Participatory Notes, etc.

Hawala is a banking route through which money moves on the basis of trust and without the actual movement of money, originating in the Middle East. The customer gives money to the hawala operator to be transferred to a recipient. The hawala broker then contacts his counterpart in the recipient’s city with instructions to the remittance of funds, minus commission charged.

The parent company may also choose to create a Special Purpose vehicle, also known as a shell company in tax havens such as Cayman Islands, British Virgin Islands, Mauritius. Further transactions between parent company and subsidiary occur through the shell company, as such tax havens do not declare amounts deposited. Records of such transactions were recently leaked in the Panama Papers, containing 11 million documents relating to 214,000 shell companies set up by firm named Mossack Fonseca in 35 countries around the globe.

Participatory Notes are derivatives issued by Foreign Institutional Investors, without having to be registered at SEBI. However, according to recent norms if an FII registered with BSE wants to create a derivative in the nature of a PN then, KYC has to be compulsorily done on this PN, to find out the source.

Difficult to measure black money or corruption as by definition, it is hidden. Some established measures are as follows:

  1. Input output model by Leontief- This model describes how input from one industry becomes output for another, through a matrix or grid. It shows the technical coefficient i.e proportion of inputs required in each unit of output. It depicts what ought to be the output, which when multiplied by the value gives the income from the output. The corresponding tax can also be calculated by multiplying by the tax rate. The difference between this tax figure and actual amount of tax collected is black money.
  2. Currency method- Difference between GDP as calculated by CSO and GDP calculated by multiplying appropriate velocity of money with the money supply in the country gives value of black money.
  3. National Accounts System- Total national income is divided into salaried and non-salaried component i.e income from business. Then calculate income tax which ought to be collected from these areas. Difference between this amount and actual amount collected will give amount of black money.

NIPFP used NAS in 1985- in 1970s, extent of black money in India was 18%, while in 80s it grew to 21%, which shows the growth of this parallel economy. Today, black money is estimated to be around 25% of GDP. World Bank Research on Inequality calculated the extent of parallel economy for Asia at 34% as a whole, with India being under-average at 22%.

Legislative response to corruption:

  1. CBDT (Central board of Direct Taxes) entrusted with responsibility of tightening direct tax provisions where income could escape.
  2. DTAA (Double Tax Avoidance Agreement) between India and different countries to give fair framework to all companies. It also brings about more transparency in ownership of companies.
  3. Prevention of Money Laundering Act (PMLA)
  4. Prevention of Benami Transactions Act- only relates to property and real estate
  5. Public Procurement Bill – Includes clauses for transparent tendering of procurement process by the government, which is estimated to be 30% of GDP.
  6. Lokpal and Lokayukta
  7. Whiste blowers Bill- Clauses with adequate protection to be given to whistle blowers and also penalties for invalidated information provided.
  8. Unique Identification (UID) – Helps to ensure that subsidies and other benefits provided reach the accounts of the targeted population.

Voluntary Disclosure of Income, was first introduced in 1997 under then Finance Minister P. Chidamabaram and recently under Arun Jaitley. While a huge success the first time, it was a relative dud the time around as it gives a soft signal to the citizens that there will always be amnesty schemes by the government.

Demonetisation is a signal of intent, that the government is serious about the issue regarding black money, which is evidenced by its past measures as well such as the Benami Transactions Bill, Voluntary Disclosures and now monetisation. It too can only be taken up once and not again and again as it is very expensive. It was taken up as its cost is still lesser than the impact of black money in India. The true trick lies in catching these evaders in the intent level i.e through legislative framework through other measures established, rather than at the cash level.